Britain’s small business community has reacted with thinly veiled fury to the disclosure that Work and Pensions Secretary Pat McFadden privately told Lord Mandelson that every Labour meeting was consumed by the question of “who can we tax in order to pay benefits to others”, with one CEO declaring the country is “rearranging deckchairs on a very expensive, heavily-taxed ship”.
The message, sent in May 2025 when McFadden was running the Cabinet Office, was among more than 1,000 pages of correspondence released following the Humble Address compelling disclosure of communications with the former US ambassador. In it, the minister bluntly tells Mandelson that his colleagues “are asking the wrong questions”.
A spokesperson for McFadden said the minister had “fully complied with the Humble Address and handed over all messages”, adding that his only contact with Lord Mandelson since the latter left government had been to urge him to “think about the victims in all this and apologise to them”.
For business owners contending with the highest UK tax burden in seven decades, however, the leaked exchange has confirmed a long-held suspicion: that the Treasury sees enterprise as a cash machine rather than an engine of growth.
Paul Denley, chief executive of London-based Oakham Wealth Management, said the comment reflected a default political reflex that was strangling investment.
“Every government inherits problems. The test is whether it reaches for the same tired tools or has the imagination to do something different. Too often, the focus seems to be on redistribution rather than growth, innovation and wealth creation,” he said.
“The concern is that taxation has become the default policy response to almost every challenge. Successful economies do not become more prosperous by continually redistributing a fixed pool of wealth. They grow by encouraging enterprise, investment and productivity.
“At some point, the conversation has to shift from how we divide the pie to how we make it bigger. Otherwise, we risk managing decline rather than creating prosperity. Without a stronger focus on growth, we are simply rearranging deckchairs on a very expensive, heavily-taxed ship.”
His unease is rooted in hard numbers. The Office for Budget Responsibility now puts the tax take at a 70-year high of around 37 per cent of GDP, the steepest level since records began in 1948 – a trajectory that has only sharpened since Rachel Reeves signalled fresh tax rises to plug a £40bn Budget black hole.
Graham Nicoll, chartered financial planner at NCL Wealth Partners, said the McFadden message would resonate with anyone running a small enterprise.
“Pat McFadden’s reported comment reflects a frustration many business owners recognise, the perception that, as the government faces fiscal pressure, businesses, entrepreneurs, investors and higher earners are often seen as the first source of additional tax revenue,” he said.
“The concern is not necessarily about paying tax, but about the cumulative impact of repeated tax increases and policy changes that impact confidence, the attractiveness of investing and growth in the wider economy. Small businesses create jobs, generate tax receipts and drive local economies.
“By exacerbating a system that rewards inactivity and can encourage unemployment, the balance is wrong. The government needs to focus on promoting people to upskill, to aspire to contribute and to get rewarded – and on driving growth rather than stifling it.”
That argument is buttressed by the latest Office for National Statistics figures, which show more than a million 16- to 24-year-olds are not in education, employment or training, with youth unemployment running at 16.2 per cent – the highest rate since 2015.
Tony Redondo, founder of Newquay-based Cosmos Currency Exchange, was unsparing in his assessment of the administration’s record so far.
“This neatly encapsulates the economic illiteracy of this government. They are not in the least concerned with wealth creation,” he said.
“The cost of this myopia is stark: a record number of young people not in work or education, record-high taxation, an economy on its knees, unemployment at 5 per cent and rising, and government borrowing costs that recently reached levels exceeding those that triggered the Liz Truss meltdown of 2022.
“The Tories deserved a good kicking at the last election, but the country does not deserve this shambolic excuse for a government. Two years into Labour’s first term in office in 15 years, they are behaving like a Manchurian candidate, hell-bent on destroying the UK from the inside out.”
Michelle Lawson, director of Fareham-based Lawson Financial, focused on the impact on those who keep the lights on.
“This makes me sick to the core. Millions of people in the UK of all ages get up every day to go to work, and some have multiple jobs to pay the bills,” she said.
“Labour bleat on with their rhetoric on the importance of business but this shows their lack of knowledge and understanding of the basics. In two years they’ve managed to do what no other government has done, become the most unpopular and the most despised, yet the Prime Minister still hasn’t got the memo.
“With all the notes in these papers, there must be plenty to just give him the push he and the Chancellor need. The damage they have done is still repairable but comes with other concerns. Rather than taxing just about every possible morsel, looking at the systemic root cause of these problems and a good financial review of their spending may help. Another fine mess this shambolic lot have put us in.”
Her view chimes with that of the Federation of Small Businesses, which has spent recent months lobbying the Treasury over the threshold freeze that swept 104,000 small firms into the business rates net in April 2026.
Steven Greenall, director of Greenall Estate Planning, offered the bluntest verdict of all: “Labour are doing their utmost to talk themselves out of winning the next election.”
For Sir Keir Starmer’s government, the political risk is that the McFadden message becomes shorthand for a Whitehall mindset that asks reflexively who to tax next rather than how to grow the economy out of trouble. For Britain’s SME owners – the constituency Labour spent two years courting in opposition – the dossier reads less as a leak and more as confirmation.
Jamie Young
Jamie is Senior Reporter at Business Matters, bringing over a decade of experience in UK SME business reporting.
Jamie holds a degree in Business Administration and regularly participates in industry conferences and workshops.
When not reporting on the latest business developments, Jamie is passionate about mentoring up-and-coming journalists and entrepreneurs to inspire the next generation of business leaders.
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